Volume 11, Issue 15 | April 12, 2013

Editor's Note

Prices Climb for the Sixth Time in Seven Weeks

Week in Review for April 5-11, 2013

Last week's price drop was not repeated this week. Thus, for the sixth time in seven weeks energy prices climbed. For this seven-day report period the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 3.4%. The 12-month average price for peak power on the PJM rose 3.2%.

The unusually cold temperatures that hit most of the U.S. in March played a major role in this recent price rally. The cold weather helped wipe out the natural gas storage bubble and placed upward pressure on prices.

According to the U.S. Energy Information Administration (EIA), March 2013 had "the highest average weekly net withdrawal recorded during this four- week period since the Weekly Natural Gas Storage report began recording inventory levels in 2002." We now have 32% less gas in storage than we did one year ago. Even more concerning is the fact that storage levels have dropped 3.8% below the five-year average.

However, here is the good news: Even though natural gas and electricity prices have risen over the last year, energy prices are still trading near their second lowest level in ten years. We can thank "shale gas" for these low prices. According to EIA, shale gas production now accounts for 30% of total gas production in the United States. To put this in perspective, consider that shale gas only accounted for 8% of production in 2007.

The next wild card to watch is summer demand. The concern is that demand for natural gas may be higher this summer than last summer because more gas will be needed to refill the storage facilities. If we experience a hotter than normal summer, we could see even more upward pressure on energy prices.


Spotlight on Wind Energy

Washington, D.C.ís Union Station Now Powered by 100 Percent Wind Energy Provided by WGES

Strengthening its dedication to environmental sustainability, Union Station in Washington, D.C., has signed a three‐year contract for 100 percent WGES CleanSteps® WindPower from Washington Gas Energy Services. One of the nation’s premier, historic transportation hubs, Union Station previously used 50 percent WGES CleanSteps® WindPower for its electricity needs.
 
Union Station will transition to 100 percent wind power for its electricity load of 18,943,964 kilowatt hours annually. This is equivalent to avoiding the consumption of more than 1,400,000 gallons of gasoline or taking more than 2,700 cars off the road for one year. The world’s fastest‐growing energy resource, wind power displaces conventional power, reduces carbon dioxide and helps eliminate air pollution.
 
"Reducing our environmental impact is a key priority for Union Station and using renewable wind energy greatly aids us in decreasing our carbon footprint," said Roy Staeck, vice president of business development for Union Station. "As one of the most visited tourist destinations in the world, Union Station’s switch to wind energy through Washington Gas Energy Services is an important milestone in its history and a great opportunity to inform visitors about wind energy’s viability for businesses of all sizes."
 
Union Station is hosting Earth Month 2013, a month-long event throughout April featuring interactive, eco‐friendly experiences designed to raise awareness of environmental issues and encourage sustainability. Presented by Earth Day Network and the Premier Tourist and Landmark Association, this event will reach the more than 100,000 visitors who travel through Union Station’s doors each day. As an event sponsor, Washington Gas Energy Services will educate attendees about how they can reduce the environmental impact of their energy use through carbon offsets and wind power.
 
"With 37,000,000 visitors passing through its doors each year, Union Station sets an example to visitors, commuters and Washington, D.C. residents through its demonstrated commitment to environmental sustainability," said WGES President, Harry Warren. "As a leading competitive energy supplier, we look forward to continuing to work with Union Station to lower the environmental impact of this landmark through renewable energy."
 
In the District of Columbia, Maryland and Pennsylvania, businesses, organizations, government entities, institutions and individual residents can purchase their electricity and natural gas supply from retail energy providers. Customers in Virginia may purchase natural gas and customers in Delaware may purchase electricity from retail energy providers. To learn more about how WGES and its CleanSteps® products can benefit your business, visit www.wges.com/commercialwind.


Natural Gas Fundamentals

Natural Gas Storage: The Gas Glut Has Disappeared. Data Released April 11, 2013

 

 

Current Week

Last Week 

Net Change 

This Week Last Year 

Prior 5 Year Average 

 

Stocks (Bcf) 

Stocks (Bcf) 

(Bcf) 

Stocks (Bcf) 

Average (Bcf) 

Total Lower 48 

1,673

1,687

-14

2,477

1,739

Storage Update: The gas bubble has disappeared. For the seventh week in a row, the U.S. Energy Information Administration (EIA) reported a larger than normal withdrawal from storage. We saw 19 Bcf come out of storage in this week's report.

Normally after April 1 you see injections. The traditional injection season goes from April 1 to October 31. Last year at this time we saw an injection of 11 Bcf. The five-year average injection for this time period was 15 Bcf.

Thanks to the unusually cold temperatures that hit much of the U.S. during March, the gas glut has disappeared for now. According to EIA. March 2013 had "the highest average weekly net withdrawal recorded during this four-week period since the Weekly Natural Gas Storage report began recording inventory levels in 2002."

We now have 32% less gas in storage than we did last year at this time. Even more concerning is the fact that storage levels have dropped 3.8% below the five-year average.

As a result, the demand for natural gas may be higher this summer than it was last summer as more gas will be needed to refill the storage facilities. This event could place more upward pressure on energy prices, especially if we have a hot summer.


Rig Count for Natural Gas

Weekly Drilling Rig Update: The active U.S. gas rotary rig count for natural gas released by Baker and Hughes for the week ending April 5, 2013 was 375 rigs. This was a decrease of 14 rigs from the previous week. The count is 272 rigs lower than the count reported this same week last year. We are 60% below the five-year average gas rig count of 946.


NYMEX Natural Gas Monthly Settlements for the Past 12 Months

(Price per therm at the well-head)

This was the closing price of gas at the well head for each of the past 12 months. The closing price for a month occurs on the 3rd business day prior to the start of the month. 

May-12

$0.2036

Sept-12

$0.2634

Jan--13

$0.3354

June-12

$0.2429

Oct-12

$0.3023

Feb-13 

$0.3226

July-12

$0.2774

Nov-12

$0.3471

Mar--13

$0.3427

Aug-12

$0.3010

Dec-12

$0.3696

April-13

$0.3976


NYMEX Values per Month for the Forward 12 Months

Thursday, April 11, 2013

(NYMEX - Price per therm at the Henry Hub well-head)

May-13

$0.4139

Oct -13

$0.4241

Mar-14

$0.4406

June-13

$0.4179

Nov-13

$0.4305

April-14

$0.4049

July-13

$0.4225

Dec-13

$0.4452

12-month avg.

$0.4293

Aug-13

$0.4248

Jan-14

$0.4541

11/2013-03/2014

$0.44406

Sep-13

$0.4237

Feb-14

$0.4499

Crude Oil

$93/barrel 


NYMEX Graph for Natural Gas - 12 Month Average Price per Therm at the Louisiana Well-Head

(Excludes Interstate Transportation)


PJM Electricity

PJM Graph for Electricity - 12 Month Average Peak Power Price

On-Peak 1 Year Forward Price


Weather

Local Heating Degree Days*

 

Heating Degree Days** 

 

Nov - 12

Dec - 12

Jan - 13

Feb - 13

Mar - 13

April- 13 

 Actual

543

603

759

722

651

 

 Normal

466

786

899

704

568

 

 Departure from Normal

17%

23% 

16% 

3% 

15% 

 

Colder

Warmer

Warmer

 Cooler

Cooler

 

**Heating degree days are calculated by comparing the day’s average temperature to a 65 degree baseline. If the day’s average temperature is above 65, there are no heating degree days that day. If the day's average temperature is less than 65 degrees, subtract the average temperature from 65 to find the number of heating degree days for that day.